NESO’s Own Numbers Blow the Doors Off Net Zero.

For years the public has been told that Net Zero is not only necessary, but affordable — that any short-term pain will be outweighed by long-term savings. That claim has now been fatally undermined by the National Energy System Operator’s (NESO) own Economic Annex to its Future Energy Scenarios. When examined closely, the data reveals that the UK’s “Holistic Transition” to Net Zero is not marginally more expensive than slowing down — it is hundreds of billions of pounds more costly, even before realistic assumptions are applied.¹

The headline figure reported in parts of the media suggested that Net Zero would cost around £350 billion more than a slower “Falling Behind” pathway. But this figure already understates the problem. NESO’s underlying workbooks show that between 2025 and 2050 the cumulative difference in capital and operating costs rises to between £360 billion and £374 billion, depending on which dataset is used. When those capital costs are annualised properly — as households and businesses actually experience them through bills and taxes — the gap widens further to over £600 billion.²

Crucially, even this eye-watering figure only holds if a series of highly optimistic assumptions are accepted without challenge. Once those assumptions are tested against real-world evidence — including recent Contracts for Difference auctions, cancelled offshore wind projects, and current gilt yields — the claimed affordability of Net Zero collapses.

One of the most significant distortions lies in how electricity generation costs are modelled. NESO assumes capital costs for offshore wind falling to around £2.0 billion per gigawatt by 2035.³ Yet real projects tell a very different story. The now-cancelled Hornsea 4 offshore wind farm implied costs well above £3.3 billion per gigawatt, even before financing pressures made the project unviable.⁴ Similar gaps exist for solar. NESO assumes utility-scale solar costs falling below £400 per kilowatt, yet recent UK solar farms that have reached operation show capital costs closer to £950–£1,000 per kilowatt.⁵

One of the most significant distortions lies in how electricity generation costs are modelled. NESO assumes capital costs for offshore wind falling to around £2.0 billion per gigawatt by 2035.³ Yet real projects tell a very different story. The now-cancelled Hornsea 4 offshore wind farm implied costs well above £3.3 billion per gigawatt, even before financing pressures made the project unviable.⁴ Similar gaps exist for solar. NESO assumes utility-scale solar costs falling below £400 per kilowatt, yet recent UK solar farms that have reached operation show capital costs closer to £950–£1,000 per kilowatt.⁵

These discrepancies matter because capital cost assumptions flow directly into the claimed “cheapness” of renewable electricity. By understating build costs, the models produce artificially low levelised costs of electricity that bear little resemblance to what the market is actually delivering. This is why projects are being cancelled, rebid, or withdrawn despite supposedly attractive economics.

A second distortion concerns the cost of capital itself. NESO assumes discount rates for solar as low as 5%, below the yield currently available on long-dated UK government bonds.⁶ In effect, the modelling assumes that investors will accept lower returns from high-risk, weather-dependent generation than they could achieve by lending to the UK government. At the same time, gas-fired generation is modelled with higher discount rates, pushing its apparent cost upwards. This inversion of financial reality is not a technical oversight — it is a structural bias that favours intermittent renewables on paper.

Load factor assumptions further compound the problem. NESO models offshore wind operating at close to 47–51%, despite the UK’s actual offshore fleet achieving below 40% in 2024.⁷ Onshore wind is assumed to operate above 30%, when real-world averages sit closer to 25%. These inflated load factors again suppress the apparent cost of renewable electricity while ignoring the system-wide consequences of intermittency, curtailment, and mismatch with demand.

Perhaps the most consequential distortion, however, lies in the treatment of carbon pricing. NESO’s analysis adds over £40 per megawatt-hour to the cost of gas-fired electricity purely through assumed future carbon prices, pushing its modelled cost close to £100/MWh.⁸ These carbon prices are not market inevitabilities — they are political constructs. UK carbon prices were around £30 per tonne earlier this year and only rose following policy signals about alignment with the EU system. NESO nonetheless assumes steadily rising carbon costs out to 2050, ensuring that gas appears permanently uncompetitive regardless of actual fuel prices or system need.

The effect of this approach is profound. When realistic generation costs are used and artificial carbon penalties stripped out, gas-fired electricity emerges as a low-cost, dispatchable backbone — while the operating cost savings claimed for full electrification evaporate. The supposed long-term savings of Net Zero depend entirely on assuming electricity prices that the UK has never achieved and is moving further away from in practice.

Transmission costs expose a further layer of hidden expense. NESO’s own figures show over £315 billion of onshore and offshore grid investment required under the Holistic Transition, almost all of it driven by the need to connect remote wind and solar projects far from centres of demand.⁹ A slower pathway still requires nearly £273 billion. A rational alternative — prioritising existing generation, proximity to demand, and system stability — would avoid a substantial proportion of this spend entirely.

When hydrogen, engineered removals, storage, and distribution upgrades are added to the picture, the scale of unnecessary expenditure becomes clear. Independent analysis of NESO’s own numbers suggests that abandoning the Net Zero race could avoid well over £400 billion in capital spending even compared with the “Falling Behind” pathway — and far more compared with a true pause on expansion.¹⁰

This helps explain why the Economic Annex was delayed repeatedly before publication. The data does not merely challenge political messaging — it contradicts it. Far from proving that Net Zero is affordable, NESO’s own modelling shows that it is only viable on paper if costs are bent, risks ignored, and carbon prices weaponised.

The uncomfortable conclusion is this: the UK is not being driven towards Net Zero by engineering necessity or economic sense, but by modelling frameworks designed to justify a predetermined outcome. Physics, finance, and infrastructure reality are telling a very different story — and increasingly, even the official numbers can no longer hide it.

Footnotes

1. NESO, Future Energy Scenarios 2025 – Economic Annex, December 2025.

2. NESO, Economic Output Workbook; see also NESO Figures 11 and 12.3. NESO, Economics Assumptions Workbook, generation capex assumptions.

4. Planning Inspectorate, Hornsea 4 Funding Statement (EN010098), 2021; Ørsted cancellation announcement, 2025.

5. UK Companies House filings: Stokeford Solar Ltd (2024 accounts); Alfreton Solar Ltd (2024 accounts).

6. NESO, Cost of Capital by Technology, Economic Annex; UK Debt Management Office gilt yields, 2025.

7. DESNZ/NESO generation statistics; CfD performance data 2020–2024.

8. NESO, Levelised Cost of Electricity assumptions, 2035 projections.

9. NESO, transmission investment tables, Economic Annex.

10. Derived from NESO Economic Output Workbook; analysis by David Turver, Eigen Values, December 2025.